Thursday, January 19, 2017

The Very Dangerous CBO Reconciliation Procedure

The Keynesian big spender does a decent job of explaining how the CBO reconciliation process works:

Inevitably, Congress has more attractive uses for new funds than it has sources of new funds, so there is always is a desperate search for “pay-fors” — measures that are scored by the Congressional Budget Office as raising revenue or reducing outlays and thus can be used to finance new initiatives. The pressure is particularly acute this year with the ambitious plans of the Trump administration. There is also the likelihood that the use of the reconciliation procedure will preclude careful deliberation of proposed pay-fors.

Note well: "There is also the likelihood that the use of the reconciliation procedure will preclude careful deliberation."

These budget calculations are always edgy, to begin with. With even less "deliberation," they will in many cases come nowhere near approaching reality.

The chance for a huge spike in the budget deficit under Trump is very real. Though the spike might not occur until year 2 of the Trump administration if enough money flows back into the US from foreigner accounts in year 1 after Trump eases the tax burden of bringing money back into the U.S.